Google surprised by Nexus 7 16GB demand? Why?

First, the apparent $50 difference in prices really isn't $50. The 8GB model is only available through the Play Store and Google charges $15 US or $20 CDN shipping. The 16GB model can be purchased from several retail stores so that price difference between the models is reduced to $30 to $35. Had I known this before I pre-ordered, I too definitely would have waited for the 16GB model (which would have meant waiting less than I did for the 8GB).

Second, without expandable storage, there is definitely a perception that the 8GB model will run out of space far too quickly. Although there are solutions, most people just aren't aware of them or just want something simpler.

Finally, Google really should have known that the market for a $250 tablet was very strong. It is still well below the $400 mark of most 10-inch tablets.

It is unfortunate Google was so desperate to get "below" the $200 mark. They could have simplified by having a single model at the $250 price point, added in a couple of other missing features that were referenced in various reviews (like expandable storage, HDMI, and a rear camera), and still actually made a slight profit from the sale of every unit.